Former Mt. Gox CEO Mark Karpeles is a free man after a court acquitted him of embezzlement charges. Japanese prosecutors had filed an indictment against him alleging misappropriation of funds from Mt. Gox accounts and manipulating company records. The prosecution was seeking a 10-year prison sentence.

The court found Karpeles guilty of manipulating records. Evidence brought forth revealed that he inflated Mt. Gox exchange holdings by $33.5 million. Transactional records indicated that he used the money to invest in other ventures including a 3D printing business.

The embezzlement charges, however, were dismissed due to insufficient evidence. Mt. Gox did not have a reasonable accounting system in place during its heyday when executives borrowed money from the agency.

The court, therefore, ruled that it would be impossible to determine exact figures in the company’s accounts, subsequently making it difficult to come up with evidence supporting the claim.

It also declared that the fund transfers were not illegal but went against the company’s best interests. Among the issues brought to the foreground by prosecutors was Karpeles decision to use Mt. Gox funds to buy a 3D printing business. The court saw the venture as potentially profitable to the firm and found it reasonable that he decided to use the funds in this way.

The Verdict

Karpeles was handed a two and a half year prison sentence with a four-year suspension. This means that Karpeles will not be serving any jail time unless he commits a crime within the next four years. His sentence was suspended because the former Mt. Gox exec had no prior criminal record.

The ruling came as a surprise to many observers because Japan has a remarkably high conviction rate of 99 percent. This puts Karpeles in the one percent club. In addition to embezzlement, prosecutors had also lodged an aggravated breach of trust case against him, but these charges were thrown out as well.

Mt. Gox Hack and Aftermath

The Mt. Gox hacking saga has dragged on for years and left many questions still unanswered. The bitcoin exchange suffered a major hacking attack that led to its demise in 2014. The scheme had been going on for years and led to the loss of more than 600,000 bitcoins valued at about $2.4 billion at today’s rates.

At the time of the attack, Mt. Gox was facing a flurry of financial issues, and the U.S. government had already seized about $5 million of its funds for providing false information to banks.

The infamous hacking attack led to a wave of litigation cases against the company filed by disgruntled customers, investors, and creditors, forcing it to file for bankruptcy protection.

Karpeles, who was the CEO at the time, has been hounded by prosecutors ever since and was arrested in 2015 for suspected involvement in the hack. He was kept in detention for 11 months and, according to his revelation, was continuously interrogated for 50 days. He reportedly contemplated making a guilty plea just to end the nightmare.

Karpeles has always claimed innocence when faced with the allegations and continues to blame the hacking incidence on external actors. He has, however, admitted in the past that his administration methods while in the company’s leadership were wanting and some outrightly wrong. He has apologized to victims, stating the following:

“I did my best trying to grow the ecosystem by running the biggest exchange at the time. It had big problems but still managed to hang in there… At the end of the day, the methods I chose to try to get MtGox out of its trouble ended up being insufficient, insufficiently executed, or plain wrong.

I know I didn’t handle the last, stressful days of the outdrawn and painful Gox collapse very well. I can only be humble about that in hindsight. Once again, I’m sorry.”

Following the heist, Karpeles was able to recover about 200,000 bitcoins from a storage device. At its height, Mt. Gox handled about 80 percent of all bitcoin transactions in the world.

The latest news comes after an Illinois court blocked his attempt to dismiss a class-action lawsuit filed against him by users of the now-defunct Mt. Gox exchange.

The Alexander Vinnik-Mt. Gox Connection

Numerous reports allege that Russian national Alexander Vinnik was a key figure in the hacking operation that led to the collapse of Mt. Gox. His cryptocurrency exchange, BTC-e, was apparently used to launder about 300,000 of the over 600,000 bitcoins stolen from the network.

According to a WizSec investigative report, the hacking operation began in 2011 when Mt. Gox was still in its infancy. Hackers stole private keys to hot wallets granting them access to a significant portion of the network’s holdings. Digital assets deposited in compromised accounts were then siphoned off the platform in subsequent years.

Most of the transfers were executed between 2012 and 2013 and stopped in mid-2013. By this time, about 630,000 bitcoins had already been transferred to wallets controlled by Vinnik. Coins stolen from other exchanges such as Bitcoinica and Bitfloor were also traced to accounts controlled by the Russian.

The investigation by WizSec also revealed that he had transferred some funds back to Mt. Gox. Reasons behind the move are still unclear, but this is the main piece of evidence tying him to the money laundering operation.

Vinnik is currently incarcerated in Greece awaiting extradition to his native country, Russia. He was arrested in July 2017 after an arrest warrant was issued by the United States government. He is accused of laundering between $4 billion and $9 billion through BTC-e.

Vinnik has continued to protest against what he believes is unlawful detention and has been on hunger strike since November 2018. He is also wanted in France to face criminal charges. According to Russia’s human rights commissioner Tatyana Moskalkova, he should be extradited back to his native country because he is a Russian citizen and unlikely to get a fair trial in another nation.

There’s been no official report indicating his involvement in the Mt. Gox case by the various governments. So, the allegations leveled against him are still unsubstantiated.

The Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Securities Administrators (CSA) have jointly published a communiqué seeking input from the country’s crypto industry players regarding regulation.

The two government agencies are looking to protect investors following the recent QuadrigaCX exchange incident that shook market sentiment. About $145 million vanished after the platform’s CEO died while in possession of the network’s private keys. Investigators are still trying to recover the funds.

The published document underscores that no dealers have yet been authorized to operate in the country and this leaves a regulatory vacuum. The agencies emphasize that only a tailored legislative solution can protect Canadian cryptocurrency users and investors from the vicissitudes of the market.

Security safeguards and internal controls have been highlighted as crucial areas requiring extensive auditing before a crypto trading business may operate in the country.

Other benchmark provisions illustrated in the proposal include having sufficient assets to cover investor claims in case of a breach or bankruptcy.

Crypto Regulations in Mexico, India, and Israel

India Still Struggling with Crypto Regulation

Numerous jurisdictions around the world are currently grappling with crypto regulatory matters. The Indian government, in particular, has been embroiled in a legal tussle with the judiciary and industry supporters for almost a year now.

This began after the Reserve Bank of India (RBI), the country’s central bank, issued a directive in April last year barring banks from dealing with crypto mercantile entities. The order was met with fierce resistance and a wave of lawsuits from industry stakeholders.

And so just a few weeks ago, the Supreme Court of India ruled that the government should come up with a clear regulatory framework designed to fix the mess. The government was given four weeks to come up with working guidelines. The court is set to issue its own directive on the matter if the Indian administration fails to do so, and will subsequently stop hearing cases related to the crypto ban.

Many cryptocurrency companies consider the ban to be constitutionally null because no research-oriented explanations have been given to support the decision.

In a stark reversal from its usual hard-line stance, the RBI recently released a statement conceding that the crypto sector poses minimal risks to the overall financial industry but warned that its negative effects could be amplified once there is widespread use of digital currencies.

Mexico Considering Crypto Regulation

The Mexican government has also been prepping to regulate cryptocurrencies according to the latest news reports.

And just like in Canada, the administration through the country’s central bank, Banxico, is seeking suggestions from stakeholders before it starts implementing the guidelines.

The Bank of Mexico has issued a cryptocurrency regulation circular seeking input from the cryptocurrency industry. (Image Credit: Forbes)

A circular has already been issued by The Bank of Mexico and among the main recommendations is a trading license requirement for exchanges and similar businesses.

The Mexican cryptocurrency market is at the dawn of a revolution. It has achieved tremendous growth within the past two years and continues to show immense promise. About half of the country’s population of 130 million lacks bank accounts. So most people rely on alternative means, such as crypto and mobile money transfer networks, to make remittances.

Crypto Regulation in Israel

Israel has been extolled as a major technology hub. It is widely referred to as the World’s Startup Nation and is currently home to more than 200 blockchain startups. Due to the crypto industry boom, the government is currently looking at ways to regulate the sector.

The country has been working on a crypto regulatory framework since 2017 through an appointed committee tasked with coming up with a comprehensive report on the matter.

The committee submitted its final findings and recommendations about two weeks ago to Anat Guetta, the chairperson of the Israel Securities Authority. It has now been published by the Israel Securities Authority.

Among the proposed guidelines is the need for disclosure requirements. At the heart of the proposed framework was the need to regulate Initial Coin Offerings (ICOs) because they easily dampen or increase investor confidence. The commission additionally recommends that Security Token Offerings (STO) be clearly defined and assigned appropriate guidelines.

According to the regulations committee chairman, Dr. Gitit Gur-Gershgoren, the growth of the Israeli crypto sector will primarily depend on the industry’s “attitude towards regulation,” adding that supervision was aimed at contributing to its success.

Meni Rosenfeld, the chairperson of the Israel Bitcoin Association, has also commented on the report, lauding it as a step in the right direction. In his view, greater supervision will address trust concerns and add value to buyers.

He, however, indicated that the country’s regulatory body still has a long way to go in addressing major crypto community concerns. He gave the example of the present cryptocurrency and banking sector bifurcation, stressing that it was still a major problem that is often overlooked.

The country’s financial institutions are bound by the Money Laundering Law, which makes it difficult for Israeli citizens to execute crypto to fiat withdraws through the banking system. Many cryptocurrency users rely on platforms like Coinbase to make such transactions, but it’s almost impossible to, for example, buy substantial amounts of digital coins using bank deposits.

Banks are required to automatically report deposits of over NIS 50,000 ($14,000) to the country’s Ministry of Justice. Clients are also required to indicate the source of the funds. Because cryptocurrencies are anonymous by nature, most Israeli banks refuse to get involved in crypto deals for fear of facing money laundering sanctions.

This year, about 12 million Americans will get sucked into the black hole that is the short-term loan industry. Short-term, small-dollar loans, better known as payday loans, have ballooned into a $90 billion market with no signs of slowing down. With a payday loan, you typically borrow between $300 to $5,000 and pay it off anywhere from a couple of weeks to a year later. However, there’s one catch.

Payday loans have an average annual percentage rate (APR) of almost 400 percent. At this rate, a 12-month, $1,000 advance would end up costing $4,130.85 to pay off completely. To put this number into perspective, the average credit card APR is right around 17 percent.

Due to the astronomical interest rate of payday loans, those who take them out often need to take out multiple loans over time, digging themselves deeper into debt with no feasible way out. Before we get into how cryptocurrency like Bitcoin can help, though, it’s essential that we dissect the root of the issue.

Why Are Payday Loans So Popular?

With interest rates in the triple digits, why would anyone even consider taking out a payday loan? Let’s use a little bit of imagination to see why.

Imagine you’re a lower to middle-class thirty-year-old with a spouse and two kids. You’ve got a steady job, but with family expenses, you’re living almost paycheck-to-paycheck. One day on the way to work, your car breaks down. You take it to the mechanic only to find out that it’s going to cost $1,000 to repair it. Unfortunately, your next payday is still ten days away.

At this point, you’ve got a few options:

Don’t repair the car until payday, take off work, and risk getting fired.

Repair the car by taking the money out of the family budget.

Take out a payday loan so you can feed your family and keep going to work.

When facing those options, the choice is obvious. Often, the people taking out these loans have no other feasible possibilities, so predatory loaners are able to jack up the interest rates without repercussions.

The Real Issue at Hand

It’s easy to chastise payday loan companies for their predatory practices. And, there are regulations in development (sort of) that could help keep them in check. However, there’s a broader issue.

The bi-weekly paycheck is a driving force behind the success of payday loans. Back to our hypothetical:

What if, instead of receiving a lump sum check ten days from now, you could receive one-tenth of that amount each day over the same period? You would probably be more comfortable forgoing the loan to pay off the car repair knowing that you would have an influx of cash the next day. With 80 percent of payday loans being taken out within two weeks of the previous one, it’s a sandpit you want to avoid at all costs.

Two-Week Bologna

Without giving a detailed history lesson, biweekly paychecks became popular in the 1930s. At that time, calculating taxes was a manual process. Batching paychecks over some time, rather than distributing them each day, made an accountant’s job easier. Eventually, we settled on a two-week timeframe.

Nowadays, electronic filing and payments have decreased the complexity of tax accounting and payroll. However, we still have one, or actually, several forces causing a continued bi-weekly paycheck trend. If you’ve been around cryptocurrency for any amount of time, you can probably guess what these barriers are: middlemen.

The Long and Winding Road

There’s no shortage of payment intermediaries. You’ve got issuing banks, credit card companies, acquiring banks and payroll processors to name a few. Ignoring the fees that each entity charges along the way, there’s a time delay associated with each one as well.

The obvious case of intermediary bloat is in the Automated Clearing House (ACH) system that employers use to pay employees. Or in other words, direct deposit. The ACH system implements antiquated transaction deadlines that lead to one- to two-day processing delays if a business, or one of the intermediaries, misses them.

One or two days may seem negligible, but the total quickly bubbles up when multiple parties miss a deadline. Because banks collect interest on these frozen funds, they don’t have much of an incentive to improve this process.

The second, and a less well-known, barrier to daily paychecks is the payment process from customer to business. A typical credit card transaction passes through at least three intermediaries for approval, causing a company only to receive money from the transaction days later. This delay often leads to cash flow issues meaning that the business couldn’t pay employees right away even if the ACH system allowed them too.

How Can Cryptocurrency Help?

The advantage of injecting cryptocurrency into business payments and payroll is two-fold. On the payments side, businesses that accept cryptocurrency reduce any cash flow issues they may have. Instead of waiting for transaction approval from issuing banks and other intermediaries, the money hits their wallet after a few quick blockchain confirmations. This reduction in approval time opens up cash flow enabling businesses to pay employees more frequently.

Additionally, cryptocurrency paychecks aren’t bound by the limitations of the traditional ACH system. You could get your paycheck to your wallet daily, over the weekend, or even every hour if you wanted to. Combine this freedom with the functionality of a smart contract and your payment options are nearly limitless.

Companies Making it Happen

You probably know few (if any) people being paid in cryptocurrency, which exemplifies the current gap in solutions. Some could argue that a third-party solution isn’t necessary; employers should just transfer paychecks to employees’ wallets directly. However, doing so creates a headache for auditing and tax purposes.

Bitwage is probably the most well-known cryptocurrency payroll product. It includes time tracking software, invoicing and payroll customization on top of regular payments.

Another solution in the works is Request Network. Request is a platform for payment requests (get it?) with a focus on easy auditing and documentation for tax purposes. Unlike Bitwage, Request is a protocol-level product that you can use to build your own payroll solution.

Final Thoughts

Cryptocurrency payments and payroll provide convenience for most and are a near-necessity for the 12 million Americans trapped by predatory loans. As regulation continues to stall, cryptocurrency adoption may be the only way out for these individuals. Even with the current volatility of the market, the advantages of cryptocurrency paychecks are clear.

It’s only a matter of time before we start looking forward to our daily pay-times rather than the all too sparse bi-weekly paydays.

It’s no secret that the cryptocurrency industry has a checkered history with unbelievably audacious heists. And now, Shuttle Holdings and IBM have announced the launch of a new HSM-based security solution to mitigate this problem.

The system, which has been extolled as a paradigm-shifting innovation, will launch towards the end of March and targets the crypto custodial industry. Starting in beta mode, only a few select companies will have initial access.

The technology has been designed to provide a lockbox environment for private keys while allowing clients to have easier access to their cold wallets.

So, What Is an HSM?

A hardware security module (HSM) is a secure, tamper-resistant digital key storage device that relies on modules to prevent intrusions. The modules are encoded with layers of encryption and have sophisticated physical deterrence mechanisms.

HSMs are made up of microprocessor chips that effectively detect both network and physical tampering and automatically erase sensitive data once it discovers an anomaly.

Microprocessor meshing technology is used to make the packaging responsive to tampering. This prevents side channel and bus probing attacks.

The concept has been around for years, but the technology was mostly confined to major payment networks, governments, and banking institutions.

Major Hacking Incidences

Over $1.5 billion in crypto assets have been stolen from exchanges in the past year. And according to numerous investigative reports, two groups were responsible for the theft of digital assets worth $1 billion. The fact that the overall cryptocurrency sector has a market cap of just over $140 billion accentuates the seriousness of the scourge, hence the search for innovative security solutions that are more secure than ad hoc simplistic systems.

HSMs are made up of microprocessor chips that effectively detect both network and physical tampering and automatically erase sensitive data once an anomaly is discovered. (Image Credit: Gemalto)

The regulatory vacuum that continues to permeate certain sectors of the market has also left most platforms to their own devices. Many network attacks have been found to be instigated by groups located in regions with nebulous crypto legislations such as countries in Eastern Europe and politically fraught North Korea. This makes prosecution difficult.

As such, the scale of crypto thefts has continued to rise. Last year’s Coincheck heist, for example, led to a loss of $530 million worth of cryptocurrencies. Many exchanges and custodial service agencies are looking to avoid this nightmarish scenario as much as possible.

Faster Transaction Processing

Crypto trading and custodial service platforms are embracing HSM systems because of their superior security features. Another benefit, though, is their outstanding efficiency when it comes to transferring assets from cold storage. They eliminate the need for human intervention to validate transactions.

Accessing crypto funds in cold storage is usually a time-consuming process that can take up to 48 hours. This is because a human has to be physically present to authenticate transfers. Cold storage wallets are kept offline to prevent online hacking attacks, but the main tradeoff is efficiency.

While hot wallets offer fast execution, they work through a network connection and confirm transactions using API authentication processes. However, the keys have to go live for a transaction to be successful, making them susceptible to interception.

Most cold storage strategies usually rely on air-gapping to minimize the risk of hacking attacks. Chun expressed ambivalence about the notion, describing it as a borderline travesty that gives a false sense of security.

The technology utilized by Shuttle Holdings allows for network connectivity. Multiple layers of encryption and a backup system ensure that the risk of data loss and hacking is substantially minimized.

Chun explains further, “We keep keys at rest encrypted in multiple layers as data blobs so that an organization can store these backups using their pre-existing disaster recovery and backup processes and media.”

According to IBM, client data is protected “at rest, in transit and in use.”

Speaking to Coindesk, Chun highlighted that although the Shuttle Holding solution is currently integrated with IBM’s Cloud Hyper Protect Services, the system can be connected to other networks depending on client needs.

Swissquote Utilizing HSM Technology

The Swissquote banking group is among the more notable companies to recently integrate HSM technology into its crypto custodial service offering. According to the company’s recently released disclosure, customers will be able to make crypto deposits and withdrawals to Swissquote wallets starting on March 21.

The service will run on Crypto Storage AG’s proprietary infrastructure. Crypto Storage AG is a fintech company that specializes in the management of cryptocurrency assets and private keys.

The partnership will enable Swissquote to offer both custodial and trading services. Crypto Storage AG’s HSM system will be an integral part of the overall system.

Changing Market Trends

As the battle to lure in institutional investors rages on, the security solutions industry is continuously developing tools that cater to this highly prized market segment.

Some of the major tech companies that currently provide HSM security products include Thales e-Security, Gemalto NV, International Business Machines Corporation, Utimaco GmbH, FutureX, SWIFT, Atos SE, Hewlett Packard Enterprise, Yubico, and Ultra-Electronics.

According to a new research report compiled by TMR Research, the United States, European Union, and China are the leading HSM consumption markets at 32, 24 and 14.5 percent respectively. The global market size is expected to grow from approximately a billion dollars in 2019 to over $2 billion in 2024, demonstrating the need for these types of services.

Climbin’

Another week in the green for the cryptocurrency market. Dare we say, “The bear market is over?” With a couple of dips along the way, the total market cap grew from $133.8B to $137.4B this week – almost three percent growth. A few altcoins had impressive weeks as well. Stellar (22.09%), Cardano (17.59%), and Dash (10.12%) all saw double-digit increases. Most notable, however, was Crypto.com Chain’s (previously Monaco) got a 471.28% rise.

Cryptocurrency Market Stats (3/15/19)

A relatively boring week for our top three:

Bitcoin saw a 0.72% increase in value.

Ethereum played dead, moving just 0.04% upwards.

XRP crawled up 0.68%.

The Taller the Pyramid, the Further the Fall: OneCoin leader Konstantin Ignatov was arrested at the Los Angelos International Airport last Friday and promptly charged with numerous accounts of fraud. Ignatov and his sister ran a cryptocurrency pyramid scheme in which they stole billions of dollars from investors.

Starting the Bulgarian company in 2014, the two rewarded users through a multi-level marketing campaign for recruiting additional people to purchase “cryptocurrency packages.” However, OneCoin didn’t actually use a blockchain, falsified mining, and internally set a price for the coin without regard to supply and demand.

FBI Assistant Director-in-Charge William Sweeney, Jr. comments on the matter, “Unlike authentic cryptocurrencies, which maintain records of their investors’ transaction history, OneCoin had no real value. It offered investors no method of tracing their money, and it could not be used to purchase anything.” Sounds like a few other cryptocurrencies we know…

Security? What Security?: Oh, happy day – a little regulatory clarity! Colorado officially passed the Colorado Digital Token Act late last week. The new law effectively states that digital tokens with a consumptive primary purpose are not considered securities in the state of Colorado. So, if you’re creating a utility token, you should be in the clear.

There are a few stipulations, however. You need to file a notice of intent with the securities commissioner. You can’t promote the token as an investment vehicle (duh). And, you need to have the cryptocurrency network built before selling the token. There are a few exceptions to these rules, but that’s the gist of it.

Media Roundup

Crypto Goes Hollywood: Seemingly created as a 2017 bull-run cash grab with a poor sense of timing, the cleverly named Crypto released a trailer this week. With a star-studded cast consisting of Luke Hemsworth, Kurt Russel, and the ever-popular Annalé, you won’t want to miss it.

The Basel Committee Preaches No-Coinery: On Wednesday, the Basel Committee on Banking Supervision, an international supervisory group, released a statement on “crypto-assets.” They specifically refrained from using the word “crypto-currency” because of their belief “that such assets do not reliably provide the standard functions of money and are unsafe to rely on as a medium of exchange or store of value.” Tell us how you really feel.

The committee warns that, due to crypto’s volatile nature and short history, crypto-assets present a host of risks for banks that choose to acquire them or provide crypto-related services. They then outline a few guidelines that banks should follow if they choose to do so, including performing due diligence, maintaining a clear government and risk management framework, publically disclosing any crypto-exposure, and open communication with any supervisory entity.

Quoine On Trial: The Singapore International Commercial Court (SICC) issued a ruling this week on the country’s first trial involving Bitcoin. The court ruled that the exchange had wrongly reversed several trades of B2C2, a market maker. In April 2017, B2C2 placed seven orders to exchange Ethereum for Bitcoin. Due to technical difficulties, the company was able to trade at a ratio of one ETH for 10 BTC, giving just one ETH a $12,000 value. The following day, however, Quoine reversed the trades.

The court ruled in B2C2’s favor but aren’t forcing Quione to pay the full value of what the market maker requester – a little over 3,000 bitcoins. Instead, the two companies must agree upon an amount or else go to trial again.

TaxBit is a cryptocurrency tax software company that helps cryptocurrency holders and investors calculate their profits, losses, and tax liabilities, and generate IRS-friendly tax forms.

Once a user connects their exchanges via TaxBit’s read-only API keys, TaxBit automatically pulls the user’s transaction history and cycles them through their tax engine. Users are then able to see the real-time tax impact of all their cryptocurrency transactions and download their yearly tax reporting forms.

Since TaxBit only collects read-only API keys, the platform only has access to view a user’s transactions and zero access to the actual assets. In the hypothetical event of a hack, the hacker would only have access to see a user’s transactions, with no access to the assets. A TaxBit representative also stated that the platform does not store personal information such as social security numbers or tax identification numbers on their servers.

TaxBit Founders and Company Information

TaxBit was founded by two brothers and is headquartered in Salt Lake City, Utah.

Austin Woodward (CEO) is a certified public accountant (“CPA”) with a master’s degree in accounting from BYU, a top ranking accounting program in the US. Prior to TaxBit, Austin was the controller and finance professional at Qualtrics.

Justin Woodward (Tax Compliance and Legal Officer) is a licensed tax attorney with a law degree from the University of Chicago, a top law program in the US.

TaxBit Pricing

TaxBit’s pricing is separated into three tiers based on transaction volume. Every package includes API exchange integrations, real-time portfolio and tax tracking, transaction by transaction CPA and IRS audit trails, online customer support with certified tax experts, and automatic tax form generation.

TaxBit’s business model seems to leverage their in-house automated systems and processes to provide an affordable tax preparation price tag (relative to hiring a CPA) to attract cryptocurrency-savvy customers. Since most users generated losses in 2018, many of them are eligible to report those losses and increase their 2018 tax refund.

Onboarding Flow

Getting started on TaxBit is a fairly straightforward process. First, TaxBit asks some basic demographic questions that allow them to calculate a user’s individual tax rates. TaxBit displays a user’s taxable gains and losses and then applies their individual tax rates to those gains and losses to display what they owe in taxes.

After calculating a user’s tax rates, TaxBit guides users to link their exchanges. Some exchanges, such as Coinbase and Uphold that have quick single sign-on integrations allow users to click connect to easily link their exchange. Other exchanges, such as Binance and Bittrex, provide API keys allowing users to paste the values into TaxBit to connect the exchange to their account. TaxBit provides documentation and video tutorials specific to each exchange guiding users on how to quickly link their exchanges.

Once a user connects their exchanges, TaxBit’s system starts pulling the user’s exchanges. This process can take several minutes. Once the syncing process is completed, a user can immediately dive into the interface and see the tax impact of all their cryptocurrency transactions, as well as download their tax forms.

TaxBit’s User Interface

TaxBit’s user interface allows users to see a high-level overview of their account, as well as the ability to drill down on individual transactions. Users can see their total portfolio value, their gains or losses for the year, their coins, and their estimated tax liability. TaxBit tracks users cost basis on every transaction, and both short and long term gains and losses.By tracking and being able to drill down on every transaction, users can see the exact tax calculations on each of their trades. This provides users with a full audit trail in the event of an IRS audit or CPA investigation. Users can have peace of mind knowing that their taxes are being handled the correct way by certified tax experts in the cryptocurrency space.

Tax Form Generation

Once all of a user’s exchanges are connected they can export their completed IRS Form 8949 – the tax form that the IRS requires to report capital gains and losses. Users can generate their tax form within their TaxBit account in either PDF or CSV formats. PDF format is useful when a user uses a CPA to do their taxes, as they can simply hand this form to their accountant and not have to worry about the high fees for an accountant to manually prepare the form for them. CSV format is useful when a user files their taxes with popular tax filing software such as TurboTax, TaxAct, etc.

Summary

Taxation is going to play an enormous role in the maturation of the cryptocurrency industry. For the time being, however, navigating current tax laws in regards to digital assets can be a confusing and tedious process. As far as getting cryptocurrency tax help, TaxBit seems to be a good asset to utilize in order to accurately prepare your taxes and understand your tax liability.

The crypto market continues to attract new investors. And because of this growth, more Bitcoin legal issues have emerged. As investors continue to seek out blockchain-based investment options, those in the sector who don’t operate in an honest manner are bound to be revealed. Traditional investors expect a certain level of protection, and they’re not scared to seek financial damages when they believe they were duped.

In many instances, crypto investors who feel scammed lack the regulatory framework to file criminal charges against the firm responsible for the wrongdoing. The lack of criminal legal ramifications has led to a spike in crypto-related lawsuits over the last two years. Now, both the courts and investors prepare for lengthy litigations in an attempt to rectify these situations.

Is Bitcoin Safe and Legal?

The rise in crypto-focused litigation has many in the financial sector questioning if Bitcoin is safe and legal. The answer to this question depends on where you live. In some countries, such as Japan, governments consider Bitcoin a legal form of payment. Shops accept the cryptocurrency, and you can buy, sell and trade cryptos without worry.

In other countries, like China, the opposite rings true. All financial institutions, including banks, lenders, and payment processors, are banned from engaging in cryptocurrency transactions. China isn’t alone in its anti-crypto stance. Over the last two years, many countries hastily passed legislation to slow down crypto adoption in their region. Here is a list of countries that have instituted Bitcoin bans to date.

Algeria

Egypt

Morocco

Bolivia

Colombia

Ecuador

Saudi Arabia

Iran

Bangladesh

Nepal

Pakistan

Cambodia

Indonesia

While these countries are at the extreme end of the anti-crypto spectrum, there are many nations with partial bans or institutional bans, such as Canada. Canadian banking institutions are unable to participate in cryptocurrency transactions or provide services to those who do, such as exchanges.

Bitcoin Legal Issues

The good news is that the list of anti-crypto countries is shrinking, but as it does, it’s important to understand how legal precedent is set and how crypto lawsuits reshape the entire sector. One case alone could alter the development of the market in a particular country.

Below is a list of some of the most highly publicized crypto lawsuits currently underway. Each of these cases involves individuals who believe they were misled in some way. Now, they seek financial damages for their losses. Consequently, their cases could also bring some much-needed clarity to local financial regulators.

Craig Wright and the Billion Dollar Case

Longtime crypto activist and self-proclaimed Bitcoin creator Craig Wright continues to find himself in the throes of a multi-billion dollar bitcoin legal issue. The lawsuit stems from the alleged theft of 1.1 million bitcoin following the death of Dave Kleiman. According to reports, the brother of the late Dave Kleiman claims that his brother’s bitcoins were unlawfully transferred following his untimely death.

Craig Wright via Twitter

Originally, the suit was for $10 billion, but as the price of Bitcoin dropped, it’s now worth around $1 billion. Wright and Kleiman were partners in a Bitcoin mining facility known as W&K Info Defense Research, LLC. Ironically, the case could help to shed light on Bitcoin’s creator as Craig Wright previously claimed to be the real Satoshi Nakamoto. The courts could request proof.

Bitconnect Scamsters

It’s not a Bitcoin legal issue specifically, but the Bitconnect scam may go down as one of the biggest crypto debacles of all time. The Bitconnect platform promised investors huge returns for lending their funds to others in the community. In the end, the entire project turned out to be a Ponzi scheme that defrauded thousands of investors internationally.

Rather than just take their losses, many investors began filing lawsuits against the firm alleging everything from misrepresentation to theft. In October 2018, this hodgepodge of lawsuits melded into one comprehensive case. According to reports, the lawsuit cites 22 legal violations. Notably, the lawsuit lists the company as well as over 40 different individuals who marketed or solicited the firm’s services.

Paragon Coin’s Star Power

What do you get when you mix a famous rapper, a beauty queen, weed, and the blockchain? If you guessed a lawsuit, you win the grand prize. The Paragon coin project entered the market as an all-inclusive cannabis blockchain logistics platform. Paragon coin holders believed that they invested in a blockchain-based system that monitored products from seed to dispensary.

The Paragon platform looked to be the real deal. The company even raised $70 million during their ICO. Everything was going great until it was revealed that Paragon had started buying millions in personal real estate. Investors felt the snub and started taking legal action against all parties involved. Interestingly, the coin’s main promoters were The Game and former Miss Iowa, Jessica VerSteeg. The case could set precedent regarding the responsibilities of those promoting future ICOs.

LongFin Corp: Hyped Numbers

Blockchain-based stocks saw impressive growth in 2017. The hype surrounding the market was at an all-time high, and investors were eager to participate in the crypto market in any way possible. Unfortunately, many of these new investors fell victim to the scammers behind LongFin Corp.

LongFin entered the market as a little known, publicly traded FinTech firm. Within months of opening, the company announced the acquisition of a blockchain-based firm called Ziddu. This caused the company’s shares to go through the roof. According to reports, LongFin Corp’s shares were valued at $6 billion at its peak. Company officials owned most of the shares.

They sold off their shares at peak prices, as per your traditional stock scam. In April 2018, the SEC stepped in. Due to the use of cryptocurrencies, the SEC decided the best approach was to go after the firm for illegal distribution of shares.

While this drama ensued, investors organized a class action lawsuit against the company. The lawsuit alleges that LongFin provided false information and failed to disclose and/or misrepresented important company information. The company reportedly lied about a lot of important details including the CEO’s age, where the firm was located, and who was on the board.

Bitcoin Legal Issues – Court Adjourned

As crypto adoption continues to expand, more Bitcoin legal issues will go to court. These cases are extremely important because they have the ability to determine the future of the entire crypto market. For now, the crypto community is carefully awaiting how these cases will play out over the coming months.

Admittedly, it is a bit odd phrasing anything as the history of Bitcoin, since it only got its start a decade ago. However, the short life of this pioneering cryptocurrency is already storied with drama, innovation, and memes (the glorious memes).

The background to Bitcoin’s start is peppered with enigmatic characters, contentious tribalism, and millennial millionaires. Stories of overpriced pizza, a Stanford mafia, and people you likely haven’t thought about since watching the Mighty Ducks or The Social Network.

And whether it was Brock Pierce and the Winkelvii twins who piqued your interest here, or the incredible developer community, which has molded and shaped the code cementing the protocols behind Bitcoin, the peaks and valleys in the history of Bitcoin go far beyond its price volatility.

Bitcoin History: Start to Present Day

Pre Bitcoin

Bitcoin is the sum of its parts with a genius twist. Like the personal computer, the Internet, and iPhone before it, Bitcoin is a compilation of a handful of existing technologies and theories. It is this collection of virtual currencies and digital networking that enabled Satoshi to craft a decentralized and immutable digital currency.

Post Bitcoin

Bitcoin, the idea, has been released to the world. Satoshi’s white paper has immortalized the theory behind decentralized blockchains. Aside from erasing every copy of the Bitcoin white paper ever in existence, there is no turning back now.

Early 2009 saw the first implementation of Satoshi’s theorized Bitcoin. After which, there is a decade long explosion of ideas and technologies pushing Bitcoin and subsequent cryptocurrencies into new territories.

Forbes quote about Wikileaks accepting bitcoin reflects the early belief that bitcoin was anonymous and untraceable. “On Tuesday the secret-spilling group announced via Twitter that it will now be accepting donations of Bitcoins, a wholly digital and theoretically untraceable currency.” [Source]

“A first software implementation of the Bitcoin Cash protocol, called [Bitcoin ABC], was recently [revealed] by its lead developer, Amaury “Deadal Nix” Sechét at the [Future of Bitcoin] conference in Arnhem, the Netherlands. Sechét worked at Facebook for the past years and decided to focus on Bitcoin full time earlier this year.” – [Source]

Conclusion

It’s early in 2019 and already there are more moments that merit being added to this list. Bitcoin – the community, the technology, the industry – seems to only be increasing in pace despite the deep cold from this current crypto winter.

Lightning Network, Bitcoin ETF’s, crypto regulations, institutional interests and so much more are right around the corner in this enchanting and chaotic space.

What Is the Pastel Network?

The Pastel network (Pastel, for short) is a blockchain-powered platform for artists and collectors to publish and purchase digital art. The platform turns digital works into non-fungible tokens so that you can freely trade them without the need for an intermediary.

Tokenizing digital assets has a few benefits. Besides lowing their trading fees, it gives them proven authenticity, a reliable provenance, and a censorship-free publication avenue. Let’s learn how Pastel is utilizing blockchain to bring these benefits to fruition.

Editor’s Note: CoinCentral has an established relationship and strategic partnership with the Pastel team. All content in this article is objective and non-promotional.

How Does the Pastel Network Work?

Interestingly, Pastel draws architecture inspiration from several different cryptocurrency projects.

The team built the network on top of ZCash, a fork of Bitcoin. Therefore, it uses the EquiHash hashing algorithm, produces new blocks every two-and-a-half minutes, and implements Zk-SNARKs for private, on-chain transactions. Unlike ZCash, however, Pastel doesn’t have a founder’s reward to fund operations.

Instead, they’ve implemented a Dash-inspired system of Masternodes that vote on rewards.

Pastel Masternodes

Even though the Pastel network still has miners generating new blocks, Masternodes are the crux of the system. They inspect and store art images as well as facilitate trades between users. In return, they receive PSL token payments. Masternodes also get a PSL reward from each new block.

The Pastel network implements a ranking system to ensure that a malicious Masternode, or set of Masternodes, doesn’t compromise the blockchain. Without going into too much detail, the Pastel network implements the XOR distance metric to ensure that there’s no foul play between Masternodes. The XOR distance metric was first popularized by Dash and effectively ranks Masternodes in the order of which one should receive the next block reward.

Pastel Network Process

The Pastel Network includes several features that should benefit digital art provenance and trading. Most important is the registration of artwork on the Pastel blockchain. The process goes something like this:

As an artist, you create a Pastel ID that uniquely identifies you.

With that ID, you upload image files for your digital art using the Pastel platform.

You sign this file with the private key of your Pastel ID. The signature ensures that another party, like one of the Masternodes, can’t tamper with your artwork.

The Pastel network utilizes the XOR distance ranking system to determine which Masternodes receive your piece of art.

The Masternodes check the artwork for an indecent content or plagiarism. In return for this service, you pay them a registration fee.

Finally, the art ticket becomes active on the network once the associated transactions are confirmed.

Pastel Network Art Categories

Animecoin (ANI) to Pastel Coin (PSL) Token Swap

The Pastel network has an unusual backstory. The project is a recent fork of Animecoin (ANI), a now-defunct project that with a similar digital art focus except, obviously, with much more anime.

Post-fork, only active ANI holders will be able to participate in the token swap. Therefore, if you’re holding your ANI in a wallet, you’ll need to send one ANI to an unspendable PSL wallet. The Pastel team will announce this wallet address once the token swap starts. Additionally, if your ANI is on Cryptopia (the only exchange where it’s available), it will most likely be swapped for PSL automatically.

Pastel Coin Distribution

During the token swap, the Pastel coin team will distribute half of the 21 billion PSL supply to previous ANI holders in proportion to the amount they hold. The remaining tokens follow an emission schedule similar to Bitcoin/ZCash.

Pastel Coin Tokenomics

Initially, the block reward is set to 12,500 PSL per block and will halve every four years until all 21 billion PSL are in circulation.

Pastel Network Team

CEO and Founder Jeff Emmanuel leads the Pastel coin team. As a contemporary art enthusiast with over ten years of experience as an investment analyst at various hedge firms, he has two of the three skillsets you’d expect to see in a project like Pastel.

Pastel Coin Team

Pastel network’s CTO, going by the name Airk42, fills the technology gap. Airk42 has worked on enterprise software for over 25 years, specializing in security and cryptography. He also contributed to the Bitcoin Private fork.

Where to Buy PSL

Pastel coin isn’t available yet, but if you’re looking to get involved, you can still purchase ANI before the swap. To do so, head over to Cryptopia and exchange either Bitcoin, Litecoin, or Dogecoin for Animecoin.

Where to Store PSL

We don’t usually recommend storing coins on an exchange. However, with the upcoming fork and lack of a reputable wallet, it may be best to keep your ANI on Cryptopia until the token swap. From there, be on the lookout for an announcement from the Pastel coin team about an official wallet to use.

Final Thoughts

Digital art and blockchain go together like Satoshi and Bitcoin. Although numerous blockchain projects are working with art provenance (Pepe Cash, Codex Protocol, Maecenas), Pastel coin is unique in its implementation of Masternodes in an attempt to create a completely decentralized system.

The project is still young with a lot to prove. But if the team can quickly and efficiently get their product to market, Pastel coin could become the new standard for rare, digital art.

Bitcoin is dying. Anyone who’s been around crypto for more than a few years won’t have heard that for the first time. Recently CNBC’s Fast Money segment held a mock funeral for Bitcoin. As the longest bear market in the history of cryptocurrency continues, the ironically titled business show proclaimed the end of Bitcoin.

There has been no shortage of crypto positive price predictions from guests of the show, particularly influential heavyweights like Galaxy Digital’s Mike Novogratz and Fundstrat’s Tom Lee. Yet another declaration of Bitcoins death arrives as traditional US markets like the S&P 500 inch closer to new all-time highs.

Getting Some Perspective

To their credit, the CNBC show transitioned to bull Brian Kelly who argued the case for the king of crypto. Fortunately, Kelly has done his homework on Bitcoin. This isn’t the first time the market has seen such drastic declines. Kelly went on to explain, “You know when that Bitcoin bug came on, that was just around the highs. So when we start to declare a funeral and things get really horrible, sentiment is approaching the lows.” Wise words as anyone who’s held through a major Bitcoin decline knows.

While not fully shown on this chart, Bitcoin’s first major bust was actually its worst. From June to November 2011 Bitcoin dropped a whopping 93 percent. The following two substantial declines were 57 and 83 percent respectively.

Major pullbacks in the exponential price growth of Bitcoin between 2012 and 2014

That kind of volatility would scare the hell out of anybody. It’s no surprise then that mainstream media have called the death of Bitcoin, around 347 times in fact, according to some. And while you often hear those kinds of criticisms in many places around Internetland and indeed on the streets, many people fail to realize one important thing: this is an exponentially bullish market.

In other words, buying and holding for the long term would have netted you returns in excess of ten, twenty, or even hundreds of times your investment. Unless your timing is prophetic, getting rich quick is not a viable strategy. Maybe the HODLers are really onto something here.

Back to Business

The reality is that nothing gets done when prices are up double-digit percentages from day to day. In crypto bull markets, companies that build portfolio trackers are probably smiling from ear to ear. Twitter is littered with screenshots and bragging contests. It’s almost impossible not to make money. Don’t hate on the bear though. Sure, speculators feel the pain when it arrives, but arguably the most important contributors to this movement (the developers) are actually getting stuff done.

Cryptocurrency exchange Coinbase even cheekily tried to file a patent for the popular crypto industry development term “BUIDL”. They later abandoned the idea, but it just goes to show that the industry needs a healthy balance between building products and services and seeing the value of them rise in the long run.

Defining Success

Perhaps the biggest issue in defining the success of Bitcoin is in the metric that’s used to measure it. Unfortunately, a lot of naysayers focus purely on the price. That’s a somewhat superficial way to measure blockchain and its many functional parts. It’s time to dig a little deeper. Amongst a number of other useful analytical tools that anybody can use is the daily transactional chart of Bitcoin.

This records the number of confirmed transactions on the Bitcoin network since it went live in 2009. Notice anything? Even though the price of Bitcoin trended lower in 2018 the daily transactions did not. In fact, quite the opposite happened. Adoption continues to grow and is once again approaching all-time high usage.

This makes complete sense when taking into account the financial situation of several countries. South Americans in Argentina and Venezuela continue to transact in crypto more than ever before. Staggering inflation rates are forcing more and more citizens around the world to turn to alternative stores of value defying this so-called crypto winter the market is currently experiencing.

In addition, other metrics like hash rate, while off of their highs, are still showing a healthy overall picture of the Bitcoin ecosystem. No metric is perfect but widespread adoption is arguably the grander vision of Satoshi compared to Bitcoin’s speculative value.

Bitcoin Is Dead, Long Live Bitcoin!

The famous saying comes from the times of monarchs when the death of one king would see a new one take his place. The ingenuity of programmable money means that concepts like forking introduce a way for cryptocurrencies to reinvent themselves. Bitcoin maximalists love to hate on altcoins but at the very least there’s one important service they provide: keeping Bitcoin developers on their toes.

Undoubtedly, many altcoins and ICOs are filled with hot air and lip service. That doesn’t mean, however, that developers aren’t creating some interesting ideas and tools in the alternative space. If Bitcoin wants to stay ahead of the pack, the dev team will continuously have to innovate.

The revolution isn’t going to be built overnight. And it sure isn’t going to be built on the back of one-way price movements. You could imagine how the first 90 percent price drop back in 2011 would’ve had the community up in arms seriously asking the question, “Is Bitcoin dying?”

Now in its ninth year of operation and fifth or sixth serious pullback, any experienced HODLer probably just doesn’t care. The cryptocurrency recovery is not really a recovery after all. Despite an 84 percent drop from peak to trough since December 2017, Bitcoin is still up several hundred percent from only a few years ago. You do the math.

Bitcoin isn’t dying, it’s just hibernating. And when the bear awakens, the probability is extremely high that once again it’s going to turn into a raging bull.